Older Australians are fuelling growing demand for mortgages, according to new data that also provides further evidence that first home buyers are giving up and exiting the market.

The report came as an international study released today found that Sydney had the fourth least-affordable housing market in the world, after Hong Kong, Vancouver and San Francisco.

Source: Demographia International Housing Affordability study

Australian mortgage demand was up 15.3 per cent year-on-year for the fourth-quarter of 2013, a sharp rise from 9.3 per cent in the previous period, research compiled by a private data analytics Veda firm shows.

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The increase in queries was driven mostly by older Australians, Veda said in a report released today.

The new figures reinforce official data showing that first-home buyer activity as a proportion of total borrowers fell to a record low in November amid growing investor activity.

Source: Veda

“We saw a further shift to mortgage applications from older demographics, with more first home buyers leaving the market,” Veda’s general manager for consumer risk Angus Luffman said.

“An extended period of low interest rates is supporting the lift in mortgage enquiries, which have stepped up a level and are now showing the strongest growth since late 2009.

“It is likely that we will see a continuing increase in the near term, along with sustained house price growth.”

‘Severely unaffordable’

The US-based Demographia International Housing Affordability study found that Melbourne was ranked the sixth least-affordable housing market in the world, after San Jose.

Australia had the highest number of “severely unaffordable” housing markets, at 25, followed by the US with 23 and the UK with 15.

“Each of Australia’s major markets has been ‘severely unaffordable’ for all 10 years of the survey - a distinction shared only with New Zealand, with its single major market, Auckland,” the survey’s authors wrote.

They said that in some of the markets, such as Australia and New Zealand, the link between house prices and household incomes had broken, hurting housing affordability.

All the “severely unaffordable” housing markets had restrictive land use policies, the authors added.

“There is no silver bullet to increase the supply of affordable housing,” urban planner and New York University research scholar Alain Bertaud wrote in his introduction to the report.

“But if planners abandoned abstracts and unmeasurable objectives like smart growth, liveability and sustainability to focus on what really matters – mobility and affordability – we could see a rapidly improving situation in many cities.”

Sydney growing fastest

Sydney experienced the largest growth in mortgage demand for the quarter, up 22.2 per cent, the Veda report stated. Mortgage enquiries for Victoria soared by 15.2 per cent, and by 11.9 per cent in Queensland and Western Australia.

It rose by 9.8 per cent in Tasmania, 8.4 per cent in South Australia and 2.6 per cent in the Northern Territory.

Bureau of Statistics data from 2003-4 and 2011-12 show that while home ownership across the general population has remained about 70 per cent, it has fallen across all ages groups over the past decade except for Australians aged 75 years and above.

The sharpest declines were among the younger generation. About 12.4 per cent of Australians aged between 15 and 24 are home owners with or without a mortgage in 2011-12, down from 20.7 per cent in 2003-04.

About 42 per cent of people between 25 and 34 years old were home owners in 2011-12, a fall from 50 per cent in 2003-04.

Capital city home prices posted their highest growth in four years last year when they rose by almost 10 per cent, RP Data-Rismark’s monthly home value index showed.

Sydney recorded the strongest yearly growth of 14.5 per cent, with a median dwelling price of $655,250. Prices jumped by 9.9 per cent in Perth last year, while Melbourne prices increased 8.5 per cent, Brisbane 5.1 per cent and Canberra 3.5 per cent.